A useful starting point is that not all market concepts serve the same purpose. Some describe the size of the opportunity, while others define the strategy for entering and growing within it. Confusing these leads to common problems, such as choosing a market that looks large on paper but is not actionable in practice.

The Industry Standard: TAM, SAM, and SOM

Three terms are widely used across healthcare, investment, and industry: TAM, SAM, and SOM. Together, they describe the size of an opportunity, but they do not tell you where to start.

Total Addressable Market (TAM) refers to the full extent of possible demand. It is the number of patients, procedures, or institutions worldwide that could benefit from your solution if there were no constraints. TAM is usually derived from epidemiology or global market reports. It is intentionally broad and often very large. Its role is to establish that the problem is important enough to justify building a company. It is not a practical commercial target.

Serviceable Addressable Market (SAM) is the portion of that global opportunity that your solution can realistically serve. This depends on your product's capabilities, the clinical context it applies to, and the geographies where it can be used, including regulatory access. SAM answers a practical question: where could this product actually be used in the real world, given what it is and what it is not.

Serviceable Obtainable Market (SOM) is the defined subset of your Target Market that you can realistically reach and win, given your current resources, competitive position, and go-to-market capacity. It is both a market definition and the basis from which near-term revenue is calculated.

A simple way to remember the distinction is that TAM and SAM describe what is possible, while SOM defines the reachable subset you will actively pursue within your Target Market.

Why Sizing Alone Is Not Enough

Although TAM, SAM, and SOM are necessary, they are not sufficient for building a healthcare business. They do not answer the most important practical questions facing an innovation team. They do not tell you where to begin, how to reduce risk, or how to move from initial adoption to broader use.

This limitation becomes especially important in healthcare, where adoption depends on multiple stakeholders, evidence requirements are high, and purchasing decisions are slow and structured. A large SAM does not guarantee that any institution will adopt your solution. A large TAM does not tell you how to get your first ten customers.

For this reason, the H-BMC introduces two additional concepts that are strategic rather than purely descriptive: the Target Market and the Beachhead Market.

Target Market: the First Place You Build a Real Business

The Target Market is the specific segment in which you intend to build your first sustainable business. It is defined deliberately and narrowly enough to be actionable. It includes a clearly specified user group, clinical context, geography, and use case.

In contrast to SAM, which is determined by where the product could be used, the Target Market reflects a choice about where you will focus your effort. It is shaped by considerations such as where the need is most acute, where adoption is most feasible, and where the economics are most favorable.

A well-defined Target Market should allow you to answer concrete questions. You should be able to name the types of institutions involved, describe the clinicians who would use the solution, and understand how purchasing decisions are made. If the definition is too broad to support those conversations, it is not yet useful.

In the H-BMC, the Target Market anchors the primary canvas. Your SOM is defined as a subset of it, not the other way around.

Beachhead Market: Proving You Can Win the Target Market

Within the Target Market, the Beachhead Market is the initial segment you enter first. It is intentionally narrow. Its purpose is not to maximize revenue, but to generate evidence, refine the product, and establish credibility.

The most important way to understand the beachhead is as a jumping-off point. It is the place where you demonstrate, with real-world evidence, that your model works. That evidence must be strong enough to support a credible claim that you can expand into and win the broader Target Market.

This is particularly important in conversations with investors and funders. They do not evaluate the beachhead in isolation. They evaluate what it proves. A successful beachhead shows that clinicians will adopt the solution, that institutions will support its use, and that the operational model is workable. More importantly, it shows that these results are transferable to the rest of the Target Market.

A strong beachhead has several characteristics. The need is urgent and clearly felt. The stakeholders are identifiable and accessible. There is a feasible regulatory and reimbursement pathway, or at least a way to use the product without waiting for one. Most importantly, what you learn in the beachhead must transfer directly to the broader Target Market.

The H-BMC emphasizes that the beachhead is never evaluated in isolation. Its value lies entirely in what it enables. A beachhead that generates results but does not support expansion into the Target Market does not provide a convincing foundation for a scalable business.

How These Concepts Work Together

It is helpful to think of two parallel structures.

The first is market sizing. TAM defines the outer boundary of the opportunity. SAM defines the portion that is relevant to your product. SOM defines the reachable subset of your Target Market that you will actively pursue.

The second is market entry and growth. You select a Target Market as the place to build a business. Within it, you choose a Beachhead Market as the place to start. From there, you expand to the rest of the Target Market and eventually beyond it.

These structures are connected but not interchangeable. SOM is a defined subset of the Target Market, chosen based on what is realistically reachable. Revenue is then calculated from it, making SOM both a strategic definition and a financial input.

How to Define Your Own Markets

In practice, teams should define these elements in a specific order, and treat each as a set of testable hypotheses rather than fixed conclusions. For guidance on how to construct well-formed hypotheses, refer to Part 4.

Start by defining your SAM. This requires clarity about where your product can be used. Be explicit about the clinical context, the type of institution, and the geographies where use is feasible. Avoid defining SAM based on where you plan to launch. It should reflect capability, not strategy.

Next, define your Target Market. This is a deliberate narrowing of SAM. Choose a segment where you believe adoption is most likely to be successful and where a sustainable business can be built. The definition should be specific enough that you could identify real institutions and stakeholders.

Then define your Beachhead Market. This is a subset of the Target Market. It should be small enough to be accessible and focused on early adopters, but representative enough that success there provides credible evidence that you can expand across the Target Market.

Finally, define your SOM. This requires identifying the subset of the Target Market you can realistically reach and win given your current resources and competitive position. Revenue is then estimated from that subset, based on procedure volumes, adoption rate, and revenue per use or per system. Each of these inputs should be treated as a hypothesis that can be tested and refined.

Concrete Example: a Medical Device Starting in Spain

Consider a company developing an imaging system to support laparoscopic colorectal surgery.

The TAM would include all relevant colorectal procedures globally where improved visualization could affect outcomes.

The SAM would include tertiary hospitals in the European Union and the United States that perform laparoscopic colorectal surgery and have the infrastructure to support the device. This reflects where the product could realistically be used, given regulatory pathways and clinical context.

The Target Market could be defined as tertiary hospitals in Spain performing these procedures. This is a strategic choice that allows the company to focus its clinical, regulatory, and commercial efforts within a coherent healthcare system.

Within this Target Market, the Beachhead Market might consist of academic medical centers in Spain. These institutions typically have higher procedure volumes, strong research orientation, and identifiable clinical champions. Success in these settings can generate the clinical evidence, workflow validation, and referenceability needed to support adoption across other hospitals in Spain.

This is the critical point. The purpose of starting with academic centers is not simply that they are more accessible. It is that success there provides credible, transferable evidence that the solution can be adopted across the broader Target Market of Spanish hospitals.

From this foundation, the company can expand to additional hospitals within Spain, then to other European markets, and eventually to the United States.

The SOM would be the defined subset of Spanish hospitals that the company can realistically reach and win given its current resources and competitive position — for example, the subset of tertiary hospitals with established laparoscopic colorectal programs and identifiable clinical champions. Revenue is then calculated from that subset, based on procedure volumes, adoption rate, and revenue per use or per system. This produces a realistic and defensible near-term revenue estimate.

Final Perspective

For teams trained in science and medicine, it is natural to focus on whether a solution works and whether the need is real. Those are necessary conditions, but they are not sufficient.

A strong H-BMC requires equal clarity on where the solution will be adopted first, how that adoption will be demonstrated, and how that success will translate into a broader, scalable business.

In that context, TAM and SAM define the opportunity, the Target Market defines where you will build a business, SOM defines the reachable subset you will pursue, and the Beachhead defines where you will start.